Market Cool On Raketech Group Holding PLC's (STO:RAKE) Earnings Pushing Shares 29% Lower

The Raketech Group Holding PLC (STO:RAKE) share price has fared very poorly over the last month, falling by a substantial 29%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 38% share price drop.

In spite of the heavy fall in price, Raketech Group Holding's price-to-earnings (or "P/E") ratio of 6.2x might still make it look like a strong buy right now compared to the market in Sweden, where around half of the companies have P/E ratios above 23x and even P/E's above 39x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Raketech Group Holding could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Raketech Group Holding

Keen to find out how analysts think Raketech Group Holding's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Raketech Group Holding's Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Raketech Group Holding's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's bottom line. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 30% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 20% each year, which is noticeably less attractive.

With this information, we find it odd that Raketech Group Holding is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Raketech Group Holding's P/E?

Raketech Group Holding's P/E looks about as weak as its stock price lately. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Raketech Group Holding's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It is also worth noting that we have found 3 warning signs for Raketech Group Holding that you need to take into consideration.

If these risks are making you reconsider your opinion on Raketech Group Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.